Read carefully -
AMEX Gold Bug's Index (HUI) – Closed Friday at 345.03, down 7.33.
Moving averages bullish. Resistance: 370-360. Support:
275-320. Overbought.
February Gold - Moving averages bullish. Resistance: $640-$656.
Support: $570-$620. New 26-year contract high May 12. New
recent low December 8. …Long-term bullish factors for gold include
NBC
(nuclear, biological, chemical) terrorism, and that central
banks are financing over 50% of the US external deficit. The German
Bundesbank now has 42% of its reserves in gold, Euroland
26.5%, the US 58.3% (questionable), Netherlands 87%, Spain 15%,
Austria 22%, Finland 77%, S. Africa 24%, Switzerland 36%,
France 50%, Italy 49%, Portugal 23%, Belgium 20%, Russia 5%, China 1.4%. The % of gold to total reserves: Japan 1.8%, China 2.1%, Taiwan 3%, Singapore 1.7%, Indonesia 3.6%, Peru 3.9%, Russia 9%,
Saudi Arabia 7.3%, UK 7.8%. Central bank holdings
of gold: US - 261.8 million ounces (assuming the gold is actually
there); Germany – 3,428 tonnes; Switzerland - 41.8 mil. ounces;
China - 19.3 mil. ounces; India - 11.8 mil. ounces; Russia - 12.4 mil.
ounces; Britain - 10.0 mil. ounces. The average central bank
gold holdings in 108 nations are 9.1%.
There is about $1 trillion of gold in the world, and the central banks
hold about half of it, or say they do. China ($1 trillion in foreign
reserves) could reallocate to gold. China is considering increasing
its gold reserves to 2500 tons from 600 tons. Russia, with 5% of its
national reserves in gold, is doubling its gold reserves to 10%. The
central banks of Argentina and South Africa have been buying gold.
Will S. Korea and Taiwan buy gold? Turkey's gold imports increased 47%
in September.
Gold mine production in 2004 was 79.7 million ounces, down from 83.3
million ounces in 2002/2003. Global gold
production doubled between the early 80s and early 90s, but has
leveled off since 1997 at approximately 82 million ounces
annually since then. Of the gold mined annually, 72% comes from
developing countries. Gold demand remains steady from the
Middle East, Far East, and India, and increasingly from China. The
monthly gold deficit may be as high as 110 tonnes per month
before central bank selling. Global gold mine production – 2.500
tonnes per year. According to the World Gold Council demand for
gold jewelry fell 30% in the first half of 2006, with a 40% drop in
scrap with scrap growing by 50%, while investor investment was
170 tonnes.
Dehedging by producers was 300 tonnes in the first half of 2006. Mine
production fell by 1.5% in the first half of 2006.
Central-bank sales fell 60% y/y, with full year sales at below 400
tonnes. The decline in the S. African gold mining industry, the
decrease in gold mine supplies globally, and an emerging Chinese and
Indian gold jewelry market are positive fundamentals longterm.
Jewelry consumption is 82% of the gold market. Huge jewelry demand is
coming out of India (up 55% in the last year) and
China. The Japanese have been heavy buyers of gold, as have Russians,
Vietnamese and Middle East buyers. Jewelers
purchased 73% of gold last year. In 2005, gold sales in India rose
25%. India accounts for 23% of global gold sales, the US
normally 12%. Investment funds are the biggest gold purchasers in 2006.
Investors added 194.5 million ounces of gold to their
collective holdings from 2001 through 2005, and are projected to add
another 45.2 million ounces of gold this year on a net
worldwide basis. Investors and consumers purchased a record $53.6
billion of gold in 2005. This compares with annual average
net purchases of 9.2 million ounces of gold by investors from 1950
through 2000. Gold ETFs grew 67% last year in US$. All the
gold ever collected, panned and mined since the time of Jesus is
approximately $2 trillion.
There are $30 trillion in currencies
worldwide. The Fed is now producing dollar liquidity at the rate of
roughly $1.5 trillion a year. The value of all real gold mines
(capitalization) is roughly $120 billion. Gold mine production is up
only 1%. The market cap of all gold that is above ground,
including central bank reserves, is equal to only 1.4% of global
financial assets. Real gold value can be determined by comparing
the gold price to the price of oil, and to the DJIA.
March Silver - Moving averages bullish. Resistance: $15.00-$14.25.
Support: $13.60-$12.00. Overbought. New 23-year high May
11. New recent high December 5. …The silver ETF, SLV, has taken 100
million ounces of silver off the market. Industrial silver
use has been up for three straight years, 44% of which is being used
by the electronics industry. Silver's use in jewelry and
silverware consumes 30% of annual silver production, and last year was
up 3%, discounting India. Silver's investment demand
was up 400% to 42.5 million ounces according to World Silver Survey
2005. Silver coin and medal use was up 15% to 41.1 million
ounces. Photography uses 8% of silver. More silver is being consumed
than is produced globally. The world has only 22 pure
silver mines. It can take 8-10 years to bring a new silver mine
online. Silver supply has been less than demand for the last 15
years, with a 76 million ounce shortfall in 2005. But a surplus of
48.4 million ounces is expected in 2006, the first surplus since
1989. There are presently about 400 million above ground ounces of
silver. Silver stockpiles have fallen from 2.1 billion ounces in
1990 to 400 million ounces presently. Governments hold 87 million
ounces. About 547 million ounces of silver are produced
annually.
April Platinum - Moving averages turning bearish. Resistance:
$1260-$1200. Support: $1060. Oversold. …A new 26-year contract
high May 12. A new recent low December 7. …Will there be a platinum
ETF? Platinum demand had been at an all-time high. The
global platinum market was likely in deficit last year by 6.71 million
ounces of demand versus 6.59 million ounces of supply.
Platinum will be in deficit this year for the eighth straight year.
The 2006 platinum supply should rise 5% to 7 million ounces. China
is the world's largest platinum importer. Platinum is utilized to
crack crude oil into gasoline and heating oil. So, platinum can rally
with energy. Platinum is used in catalytic converters and jewelry –
80% of its use. Russia and S. Africa produce 90% of the world's
platinum. Auto manufacturers used 3.8 million ounces of platinum in
2005. 2006 platinum output – 21-22 metric tons, about 5
million ounces.
March Copper - Moving averages turning bearish. Resistance: 360-325.
Support: 300-280. New all-time contract high May 12.
New recent low December 7. …Global copper demand has reached an
all-time high. Copper stocks are at 5-year lows. Copper
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consumption has increased since 1990 from 512,000 to 3,482,000 tonnes
annually. China's demand for copper, up 16% annually,
is expected to rise this year to 4 mmt, 25% of global copper
consumption. Chinese economic growth has exceeded 9% for 10
straight quarters. India' copper demand has soared from 132,000 to
271,000 tonnes annually (37 billions pounds). US copper
demand has improved from 2,150,000 to 2,500,000 tonnes annually. 2006
should record a copper deficit (third straight deficit) of
150,000-300,000 metric tons, with global demand rising 5.2% to 17.9
mmt. 2006 copper output – 422,000-427,000 metric tons.
Copper consumption per capita: North America – 10kg; Japan – 12 kg;
Europe – 9 kg; India, Eastern Europe, South America –
2kg. Chile produces 37% of the world's copper. Chile's copper
production was down 2.9% last year. Chile's Escondida copper
mine, the world's biggest, produces 8.5% of the world's copper. Copper
mines are also located in Zambia, the Andes of Peru,
central Canada, and in the US West. There has not been a major new
copper mine discovery in nearly a century. Aluminum as a
substitute for copper in every capacity would consume all of the
world's aluminum in only 9 days. Copper is used in air
conditioners, cell phones, Backwardation (nearby copper more expensive
than deferred copper due to heavy nearby demand
offsetting the carrying charge that otherwise would cause distant
copper contracts to be more expensive than the nearby) is
bullish.
March Palladium - Moving averages flat. Resistance: $345. Support:
$300-$320. …Palladium could face a supply deficit this year.
Palladium use in jewelry could grow from 25% to 35% this year, due to
Chinese demand and for use in the auto industry.
Palladium demand is growing in China, where demand was expected to
rise 70%. Russia and S. Africa are more transparent in
letting their production be known to the world. 2006 palladium output
– 90-92 metric tons, 8.39 million ounces.
March US Dollar Index - Moving averages bearish. Resistance:
83.0-84.5. Support: 82.0, 80.0. Oversold. New contract low
December 5, a 20-month low. ...International investment in US
securities was $65.1 billion in September. The September US
trade deficit decreased by 6.8% to a record $64.30 billion. The US
trade deficit with China - $22.96 billion, a record. The other US
trade deficits: Japan - $6.73 billion; Euro - $5.24 billion; Canada -
$5.67 billion; Mexico - $5.84 billion. The US trade deficit is 6% of
GDP. The US must borrow approaching $3 billion a day (80% of global
savings) to finance its current account deficit. The US
second quarter current account deficit was $218.4 billion, approaching
7% of GDP. Russia's US$ holdings have fallen from 70%
to 40% in the last year. Sweden has dropped its US$ reserves from 37%
to 20%. United Arab Emirates, Italy, Syria, and Saudi Arabia are repatriating US dollars. China ($1 trillion in foreign
reserves) is diversifying out of US$s. Asian central banks (primarily
China and Japan) hold 60% of all international dollar reserves, over
$1.2 trillion in US Treasuries.
Foreign investors own $2.06
trillion of US marketable securities of $4.8 trillion, 43% of
Treasuries, 32.7% of corporate bonds, 16% of US equities. Nearly 70%
of all dollars are held internationally. Globally, central banks US$
reserves are 68%. Central bank non-gold reserves are a record
$4.4 trillion. Developing nations hold $3.07 trillion, developed
nations $1.33 trillion. The US owes the world, US national debt is
$8.3 trillion. US debt to foreigners will hit $8 trillion by 2008
according to The Levy Institute.
Americans owe $8.2 trillion on their
homes, twice the amount of 10 years ago, with total household debt of
$11.5 trillion. State and local government debt is $1.7
trillion. US business debt is $7.8 trillion. US financial sector debt
is $11.4 trillion. Plus, there is the Social Security debt (unfunded
benefit liabilities of $74 trillion), unfunded Medicare liabilities,
and unfunded employee pension plans' debt. Total US debt - $46
trillion, not counting the unfunded liabilities, which take the total
up over $79 trillion. True federal deficit for 2005 - $3.5 trillion.
US personal savings rate – minus .5%, the lowest since 1933. The
likelihood is that this debt will be inflated away via the demise of
the US$. The Bank for International Settlements (BIS) reported in
terms of foreign investments: US$ - 42.5%, Euros – 39.3%.
These are long-term US dollar negatives. Y/Y money supply growth –
4.4%. There are $30 trillion in currencies worldwide. There
are $370-$460 trillion in derivatives globally.
March Euro - Moving averages bullish. Resistance: 1.342, 1.40.
Support: 1.315-1.285. Overbought. New contract high December
5, a 20-month high.
…On March 20, 2006, Iran did not open its new crude oil exchange or
begin selling its oil in Euros. The
Iranian exchange opening may be delayed until 2007. Iran, the world's
fourth-largest oil exporter, plans to reduce its use of the
U.S. dollar in world trade and increase use of the Euro, two
Tehran-based newspapers reported in December, 2006. Sweden,
Syria and Iran have moved out of US$ into Euros. The UAE (United Arab
Emirates) and Qatar have purchased Euros with their
combined $30 billion of foreign exchange reserves. Saudi Arabia, China
and Russia are diversifying their US $ reserves into
Euros. …Germany is Euroland's largest economy. German economic growth
– 9.2% in 3rd quarter. Germany's trade surplus was
a record in October. German retail sales are in an uptrend. German
consumer spending is increasing. German consumer
confidence is at a 5-year high. German producer prices are rising at
the fastest rate in 24 years – 6.1%. German inflation is above
the targeted level. Germany's current account surplus is 90.4 billion.
German business confidence is the highest in 15 years. But
German investor confidence (ZEW) fell sharply in August to a 5-year
low and dropped again in September. The German economy
is expected to grow at the fastest rate in 6 years, by 1.7% this year.
German unemployment is the lowest in four years. …French
unemployment declined for the 7th month, leaving the jobless rate the
lowest in three years. French business confidence is near a
5-year high. French consumer spending recorded it biggest leap in 7
years, and employment indexes have improved. France is
Euroland's second largest economy. …Italian business confidence is
the
highest in 5 years. Italy is Euroland's third largest
economy. …Euroland grew at the fastest pace in 6 years. Euroland
consumer and executive confidence was the highest in more
than 5 years. Euroland retail sales are up for the 6th consecutive
month in September. Economic growth is increasing.
Manufacturing in Euroland expanded recently at the fastest pace in 6
years and for the 17th month. High energy prices hurt
Euroland's economy. Euroland unemployment among its 400 million people
is down from a 5-year high to 7.8%. Euroland is a $10
trillion economy - 1/3 of world trade. Euroland core inflation –
2.4%.
The Euro is now 37% of currency trading and the primary
currency of 50 nations. Fully 70% of the world's 56 central banks have
increased their Euro holdings. Euros are now 24.8% of
central bank reserves. Interest rate – 3.5%. Y/Y money supply growth
–
8.5%.
March Swiss Franc - Moving averages bullish. Resistance: .85, .86.
Support: .835-.815. Overbought. New recent high December
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